Xbox plans major layoffs after June earnings, PS5 Gears pulled

Xbox plans to announce major layoffs shortly after Microsoft reports financial results on June 30. Sources with knowledge of the plans say cuts could number in the thousands and may include the closure of at least one studio. The company has halted the planned PlayStation 5 release of Gears of War: E-Day.

An internal memo posted on the company’s employee site said divisions were operating at a “3% accountability margin.” The memo added: “Excluding Activision Blizzard King, over the past five years, we have spent over $20 billion on ongoing investments in our content, platform, and hardware subsidy, but our annual revenue has declined nearly half a billion during that time. Going forward, this cannot continue.”

Managers told staff to expect formal announcements after the earnings call and to prepare for changes to headcount and project funding. Company communications this month signaled budget reductions across some departments, with marketing identified as an area facing particular pressure.

Employees expressed surprise at the cancellation of the PS5 version of Gears of War: E-Day. The title had been in development for PlayStation and retailers were preparing to list pre-orders. Internal plans for promotional material, including a trailer previously scheduled for a PlayStation showcase, were cancelled.

Company leaders indicated teams and projects will be reviewed as part of the restructuring. Industry sources say some development and publishing plans may be paused or scaled back while leadership reassesses priorities. The timing of the layoffs appears set to align the restructuring with updated financial guidance.

Retailers and external partners were notified after the internal decision, creating logistical and marketing complications for planned promotions. Xbox has not released a detailed schedule of layoffs or named which studios will be affected. Some observers have linked recent departures of senior leaders to the current cost-cutting planning.